MCI May Not Appeal Latest Award Decision

By Caroline E. MayerBy Caroline E. MayerMay 30, 1985

MCI Communications Corp. may decide not to appeal Tuesday's verdict by a U.S. District Court jury awarding MCI $37.8 million in damages from American Telephone & Telegraph Co., MCI Chairman William McGowan said yesterday.

The award was far less than an earlier $600 million award that was overturned and a far cry from the $5.8 billion MCI had sought as compensation for AT&T's efforts to block MCI from entering the lucrative telecommunications business in the early 1970s.

Even though the Chicago jury's verdict this week in the retrial of the 1980 case represented a sharp setback for Washington-based MCI, McGowan indicated in an interview that it may not be in the company's best interest to appeal for a larger award.

"I'm not sure what to do," McGowan said, softening his statement given less than 24 hours after the verdict was issued. At that time, he and other MCI officials promised to appeal the award, which under federal antitrust laws is automatically tripled to $113.4 million. The $600 million verdict, similarly, had been tripled to $1.8 billion, making it the largest damages award in corporate history while it stood.

"There's grounds for an appeal, there certainly is," McGowan said. "But I wouldn't appeal if I didn't think I had an excellent chance of success in the court of appeals. I wouldn't appeal if it would clutter up our second case" against AT&T.

MCI's second antitrust case against AT&T is expected to go to trial sometime next year, probably here in Washington. While alleging many of the same anticompetitive violations as the Chicago suit, the second case covers a different period. The Chicago suit dealt with AT&T's actions between 1969 and 1975; the pending lawsuit covers the years between 1975 and 1983.

McGowan claimed that it will be even easier to prove AT&T's guilt in the second suit, in which he said that MCI stands to gain substantially more money. With the same lawyers arguing both cases, McGowan suggested it might be better to spend the company's time on the second suit rather than pursue an appeal.

A decision will be made within a few weeks, McGowan said. If MCI decides to fight the jury verdict, it is likely the company first will ask the judge who heard the case to reverse the jury's decision, increase the award or order a new trial before going to the U.S. Court of Appeals, he added.

Even though the $113.4 million award was a setback, McGowan noted, "It is still probably one of the top four to five awards ever granted," especially considering that AT&T also will have to pay MCI's legal fees, which exceed $15 million.

A new trial had to be held after a federal appeals court overturned one of the jury's key findings in 1980. Although the appeals panel agreed that AT&T acted illegally by denying local telephone connections to MCI, interfering with MCI customers, providing MCI with inferior service and negotiating with MCI in bad faith, the appeals court disagreed with the jury's conclusion that AT&T tried to drive MCI out of the long-distance market by engaging in predatory pricing.

As a result, the appeals court ordered a new trial in which the jury was to consider only the amount of damages AT&T should pay MCI.

McGowan said that if MCI does appeal, its case would center on the judge's decision to allow AT&T to argue against MCI's charge that the Bell System deliberately delayed MCI's construction program and business plan. According to McGowan, that decision already had been decided in MCI's favor in the first trial and was not up for retrial under the appeals court ruling.

Nonetheless, McGowan said, he is ready to move beyond the court decision. "It is just something in passing. It is important, but you have to accommodate to what things are and move on," he said.

MCI never has counted on the award money, he added. "We've always operated on the assumption that it would not be part of our regular business. We have never used the $1.8 billion figure in our business forecast," largely because the company never knew when it could expect to receive it, given the appeals process.

"We've got a lot of funds now, close to a billion dollars," he added, noting MCI won't need to seek new capital to fund construction until late 1986 at the earliest.